The US dollar was broadly weaker during today’s European session, extending losses from the Asian session following a big tumble in reaction to a dovish and unexpectedly cautious Fed on Wednesday. Markets reacted negatively as the Fed announced that it scaled back its rate hike forecasts. This led to a dollar sell-off and by today’s European session, the US currency fell to a 16-month low below the key 111 yen level. It touched 110.65 yen, the lowest since October 2014.
However, the greenback bounced back to reclaim the 111 yen handle following US initial jobless claims data. The number of Americans filing for unemployment benefits rose less-than-expected in the week ending March 12, up by 7,000 claims for a total of 265,000. This was 3,000 claims less than what most economists estimated. Meanwhile, the prior week’s reading was revised lower to 258,000 from an initially reported 259,000. As long as the number is below the 300,000 threshold, this would indicate that the overall US job market is still healthy and on track for a solid recovery. Also helping give support the dollar was an upbeat reading of the Philly Fed business index which came in at 12.4 in March, showing a significant pick up in activity from February’s -2.8 reading.
The euro surged above the key $1.13 level for the first time in a month, after being lifted by a dovish Fed. The single currency added to Wednesday’s post-FOMC gains by gaining 1% today to peak at $1.1341.
Meanwhile economic data released today provided some additional support to the euro. The final reading for the Eurozone’s core CPI surprised to the upside to show a 0.8% rise on an annual basis from the prior 0.7% increase. Headline CPI on a monthly basis rose 0.2%, which marked a significant increase from January’s -1.4% and was above a preliminary estimate of a 0.1% gain. But year-on-year the numbers were not that good as final CPI slipped back into negative territory in February to print a reading of -0.2%.
The Bank of England held its policy meeting today and kept its benchmark interest rate at 0.5% in a unanimous 9-0 vote. The meeting minutes showed that MPC members were concerned that the uncertainty stemming from the Brexit referendum may curb growth in the UK economy.
Sterling has been one of the weakest major currencies over the past month due to Brexit concerns but today it was up 1.7% due to broad based dollar weakness. The pound touched a one-month high of $1.4501.
Another central bank meeting today was by the Swiss National Bank which also held interest rates at a record low as expected. The deposit rate was kept at minus 0.75%. The SNB repeated its pledge to intervene in currency markets if necessary, in order to curb the appreciation of the Swiss Franc and it still sees the currency as significantly overvalued.
EURCHF only briefly rose this morning up to the SNB announcement but then fell back down to last trade at 1.0920.
In commodities, gold prices were up after the Federal Reserve signaled it will not raise interest rates as much this year as previously forecast. The precious metal rose 2.6% on Wednesday following the Fed announcement and gained another 0.7% today to $1,270.81 an ounce.
The weaker dollar helped oil prices as well, pushing US oil futures to a three-month high of $39.70 a barrel. The rise in oil prices helped the Canadian dollar strenghten to its highest level in five months. USDCAD fell to $1.2944.
Risk Warning: Forex, Commodities, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you fully understand the risks involved and do not invest money you cannot afford to lose. Please refer to our full Risk Disclosure.